Portfolio updates — Three properties were completed during the year. Its multi-tenanted portfolio managed an improvement in occupancy in 4QFY09 to 95.6% from 94% a quarter ago. Renewal rental rates continued to grow but at a low rate. However, new demand rental rates for Biz & Science Park and Hi-Tech declined by 12-22% compared to a quarter ago.
Refinancing update – A-REIT will be refinancing its CMBS, due in August 2009, with existing credit facilities. Post refinancing, the average cost of debt would rise from 3.67% to 3.83%, and interest cover would still be a healthy 4.4x. A-REIT has incorporated a S$1bn MTN programme to diversify funding sources and to convert short term borrowings into mid term loans. Its gearing is now 35.5% and 90% of its interest rate exposure has been fixed for 3.4 years.
Maintain BUY, TP at S$2.00 – Operationally, we have raised our NPI to reflect the better than expected performance. However, we have reduced our DPU estimates to reflect the A-REIT change in payment of performance fees in cash rather than in units to minimize gap between EPU and DPU. DPU estimates are lowered by 4-5% and our target price is revised marginally to $2.00 (from $2.01).
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